Liminal BioSciences

Lack of Revenue Drivers A Cause of Concern: Liminal BioSciences (TSX: LMNL) is a clinical-stage biopharmaceutical company focused on detecting, developing and marketing novel treatments for patients suffering from diseases related to fibrosis, including respiratory, liver and kidney diseases that have a high unmet medical need. The company derives its revenues from plasma sales, income from milestone and licensing, research and development services and from rental revenues.

Reason of the Correction: The stock of LMNL corrected ~81% in the past one year due to ongoing selling pressure on account of negative investor’s sentiment. LMNL decided to discontinue its human-plasma protein plasminogen segment within its plasma-derived therapeutics division and discontinued its R&D activities relating to it. Furthermore, the company will close its R&D facility in Rockville, MD, within 2020. The above step hindered the expected production of the company and affected the near-term business prospects. However, the company intends to continue its operations related to Ryplazim, within its plasma-derived therapeutics segment. The company anticipates re-submission of a Biologics License Application (BLA) with FDA for Ryplazim within the first half of FY20.

FY19 Financial Highlight: The company reported revenues of CAD 4.90 million, down drastically from CAD 24.63 million in FY18. The decline was due to the drastic fall in the sale of plasma-derived therapeutics segments. In line with sales, cost of sales reduced drastically during the year while the company reported lower R&D expenses as compared to FY18. The company reported net loss of CAD 234.22 million during the period due to the above factors coupled with higher administration, selling and marketing expenses, partially offset by lower finance cost, and decline in impairments. Cash and cash equivalents stood at CAD 61.28 million while the company has total assets worth CAD 165.10 million as of December 31, 2019.

FY19 Income Statement Highlights (Source: Company Reports)

Stock Recommendation: The stock was hammered in the recent past and is currently trading near its 52-weeks low of CAD 7.03. The company exited from one of its major segments and currently focusing on streamlining its operations. During FY19, the company raised CAD 114.4 million of funds through the issuance of equity share and equity rights. The company is currently planning for the resubmission of a BLA with FDA for Ryplazim and exploring alternatives for the future commercialization of Ryplazim, if it gets approved. Considering the lack of revenue drivers and no profits, we prefer to remain on sidelines. Given the risk associated with the company, we recommend a ‘Watch’ rating on the stock at the closing market price of CAD 11.40 as on April 21, 2020.

LMNL Daily Price Chart (Source: Thomson Reuters)

Orla Mining Ltd

Stock Rallied on the hope of Positive results from Drilling Activities: Orla Mining Ltd. (TSX: OLA) is a mineral exploration and development company. Orla Mining Ltd operates in the developing the Camino Rojo Oxide Gold Project, an advanced gold and silver open-pit and heap leach project, located in Zacatecas State, Central Mexico. The group also owns a 100% stake on the Cerro Quema Project located in Panama, which also seeks for gold exploration. The Group is in the initial Gold mining company and has two material gold projects with near-term production potential.

The company confirmed the appointment of Andrew Cormier for the post of Chief Operating Officer (COO) from April 16, 2020. The company declared a temporary suspension of its operations till April 30, 2020 due to the COVID 19 crisis.

Recently, the company notified its issuance of 36.60 million common shares at a price consideration of CAD 2.05 per share amounting to total proceeds of CAD 75.03 million. The funds would be utilized for the development and construction activities of the Camino Rojo Oxide Gold Project, estimated payments related to Fresnillo Plc, and for general corporate expenses.

FY19 Financial Highlights: OLA posted its full-year financial statement wherein, reported a lower exploration and evaluation expenses of CAD 19.84 million, as compared to CAD 22.83 million, aided by lower assays and analysis expense, declined drilling and geological costs, which was partly offset by higher engineering and environmental expenses. General and administrative expenses stood higher at CAD 4.30 million, up from CAD 3.15 million in FY18. Net loss for the year stood at CAD 29.40 million, stood lower from CAD 29.91 million, thanks to lower share-based payments and depreciation, partially offset by the inclusion of interest expense and amortization costs.

FY19 Income Statement Highlights (Source: Company Reports)

Stock recommendation: The stock of OLA has generated a stupendous return of ~180% in the last one year. Currently, the stock is trading with a market capitalization of CAD 656.34 million. The business of OLA is associated in identification and drilling activities related to the exploration of gold. The company bears a potential to resume its exploration activities in coming days. The company is in its initial stage of operations and yet to start production. OLA stock is trading at a significantly higher multiple as compared to the industry average. OLA stock is trading at a forward EV/Sales multiple of about 20x, which is considerable higher than industry average (metals & mining) of 1.2x.  Given the recent run in its stock and high valuation, OLA looks expensive at current levels. We recommend a ‘Expensive’ rating on the stock at the Closing market price of CAD 2.92 as on April 21, 2020.

OLA Daily Price Chart (Source: Thomson Reuters)

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